Why the Pro Medicus Limited share price is rocketing today

Shares in medical imaging specialist Pro Medicus Limited(ASX: PME) are up more than 6 per cent this afternoon to a record high of $4.71 as investors warm to its exciting growth outlook.

The company sells cloud-based software that lets large healthcare providers like hospitals manage patients’ radiology images and reports. Its Visage 7 technology for primary diagnosis and record administration purposes has been selling well in the giant US healthcare market in particular.

It recently signed a 7-year $21 million deal with US healthcare provider Mercy Health and has now won substantially more than $44.5 million in new contracts in a little more than a year.

The software is selling well around the world as it helps large health providers in the private and public sector save time and money by improving their picture archiving and communication systems.

For the first half of FY16 the business nearly tripled net profit and has started the second half of the financial year with several big new contract wins. It is also a beneficiary of the falling Australian dollar with much of its revenues sourced in North America.

The stock is up around 138% over the past year and 470% over the past two years, although it may have further to run if it can keep winning new contracts around the world.

Public and private healthcare providers have huge budgets to buy into market-leading products such as those currently offered by Pro Medicus, although its success could attract competition from rivals like Intelerad in the medical technology space.

The company earned 2.91 cents per share in the first half of FY16, which places it on around 80x annualised earnings per share when selling for $4.71. Evidently the market is pricing in a lot more strong growth and any disappointment on this front could see the share price pull back sharply.

Other junior healthcare stocks performing well thanks to new business wins in the large US market are hospital disinfectant specialist Nanosonics Ltd.(ASX: NAN) and sleep therapy specialist Somnomed Limited(ASX: SOM). All three of these businesses should be at the top of small-cap enthusiasts’ watch lists.

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Motley Fool contributor Tom Richardson has no position in any stocks mentioned.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Shares in medical imaging specialist Pro Medicus Limited (ASX: PME) are up more than 6 per cent this afternoon to a record high of $4.71 as investors warm to its exciting growth outlook.

The company sells cloud-based software that lets large healthcare providers like hospitals manage patients’ radiology images and reports. Its Visage 7 technology for primary diagnosis and record administration purposes has been selling well in the giant US healthcare market in particular.

It recently signed a 7-year $21 million deal with US healthcare provider Mercy Health and has now won substantially more than $44.5 million in new contracts in…

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